Fred, 19 Years of Age and Single, Is Claimed as a Dependent

question 42

Multiple Choice

Fred, 19 years of age and single, is claimed as a dependent on his parents' return.He has decided not to go to college.The following information is derived from his tax return for 2012: $\begin{array}{lr}\text { Taxable interest and dividends } & \$ 3,600 \\\text { Salary from part-time job } & 2,500 \\\text { Itemized deductions } & 1,270\end{array}$ Which of the following is false?

• A)Fred's taxable income is $3,300.
• B)Fred will not itemize his deductions for the year.
• C)$1,700 of the interest and dividends will be taxed at Fred's parents' marginal tax rate if it is higher than Fred's rate.
• D)Fred's standard deduction is $2,800.

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Definitions:

Agency Relationship

A legal relationship in which one party, the agent, acts on behalf of another party, the principal, in conducting transactions with third parties.

Actual Authority

The express power granted by a principal to an agent to perform tasks or make decisions on their behalf.

Principal

The initial amount of a loan or investment, excluding any interest or dividends.

Agent

An individual or entity authorized to act on behalf of another.